EMBATTLED bank HSBC apologised for its failure to control money laundering yesterday as it admitted that a $2bn (£1.3bn) provision set aside to pay for a string of regulatory fiascos could shoot up in future.
The bank, criticised by the US Senate two weeks ago for lax controls on payments between Mexico and the US, said a $700m provision to pay US regulators and $1.3bn for UK claims on mis-sold insurance policies was an educated guess.
Finance director Iain Mackay said: “We’ve analysed what other banks have paid for other situations and then exercised our own judgment. But this is completely the decision of the Department of Justice so the figure could be materially higher.”
The firm reported a three per cent drop in its underlying pre-tax profits to $10.6bn due to the provisions. This was offset by a four per cent rise in underlying revenue from a strong performance in Hong Kong.
HSBC’s investment bank’s profit rose five per cent on the year to $5bn, faring better than rivals in a tough market where activity has been hit by the Eurozone crisis. Costs represented 57.5 per cent of income, similar to the past year and above chief executive Stuart Gulliver’s 52 per cent target.
Gulliver said: “What happened in Mexico and the US is shameful, it’s embarrassing, it’s very painful for all of us in the firm.”
Overall, it said it had put aside $1.06bn for PPI claims, $240m for interest rate swap claims and $700m for money laundering fines.